JP Morgan's latest research brief predicts that holdings in US Internet companies will outperform the overall stock market in 2008. This is despite the firm's expectation of slightly slower revenue growth for the online sector.

"We expect revenue growth to decelerate to 21.2% in 2008, from 25.6% in 2007," wrote Imran Khan, analyst at JP Morgan, in the report. "We are projecting 34% earnings growth for our coverage universe, compared to 8% for the S&P 500."

As part of its forecast, JP Morgan said that growth in US paid search ad revenue—currently the largest segment of US online ad spending—would fall to 31.9% in 2008, down from 36.8% in 2007.

Nonetheless, the tone of the report was hardly doom and gloom. Mr. Khan wrote that non-US revenue might pass domestic receipts for firms with an international reach, and that CPMs should rise this year.

Unlike JP Morgan, eMarketer expects growth in US online ad spending growth to rise slightly in 2008.

David Hallerman, senior analyst at eMarketer, predicts that online ad spending will grow by 28.5% in 2008, compared with 26.8% in 2007. eMarketer also projects that US spending on paid search advertising will increase by 27.5% in 2008, compared with 26.8% in 2007.

"However, the current economic uncertainty partially clouds the crystal ball," Mr. Hallerman said. "So, while eMarketer also sees rising CPMs, the financial ability of all advertisers to buy big into the online market is not completely certain."

Taken as a whole, consumers from Western European nations such as France, Germany, Italy, Spain and the United Kingdom are among the world’s keenest users of the Web.

But there are still differences in the rates of Internet usage and broadband penetration from country to country. Take the UK, for instance.

”Of the five major Western European nations, the United Kingdom has embraced the Internet most avidly — it was the first of these countries to see more than half its population online,” said Karin von Abrams, eMarketer senior analyst and author of the new report Western Europe: Internet Users and Usage. “Though the French, Germans and Italians were slower to respond to the Internet opportunity, all three have reached 50% penetration and even Spain is growing now.”

In fact, in Spain the online population is actually growing more rapidly than in France, Germany, Italy and the UK in percentage terms, although from a much smaller base.

eMarketer estimates that this discrepancy will persist through 2011. As other major European countries pass 60% online penetration, Spain will struggle to reach this milestone. Meanwhile, the UK will race ahead to reach almost 75% online penetration.

Already the UK’s Office for National Statistics (ONS) reports that over 60% of British households can access the Internet.

”However, as the Web becomes a commonplace tool for young people, students and the working population, one group of Europeans is in danger of missing the Internet boat,” Ms. von Abrams said. “With few exceptions, the growing ranks of citizens over 50 are not well represented online.”

According to Eurostat, while 73% of individuals in the EU-25 countries ages 16 to 24 and more than half (54%) of those ages 25 to 54 used the Internet regularly in 2006, only 20% of those ages 55 to 74 did.

The EIAA, “Silver Surfers Report,” released in July, indicates that Europeans age 55 and above who go online access a wide spectrum of information and services.

“Across the continent, consumers are doing more online and buying more than ever before,” Ms. von Abrams said. “But European business and national leaders must do more to ensure that consumers over 50 also benefit from the Internet revolution.”

The Web-based mail service Windows Live, formerly Hotmail, is a hot property for advertisers. So are Yahoo! Mail, AOL and other e-mail services.

E-mail sites are by far the largest online advertising revenue generators, according to study by Nielsen//NetRatings's AdRelevance, as cited in MarketingCharts.

"The e-mail numbers are all from ads that users see outside of the e-mail itself," said David Hallerman, eMarketer senior analyst, "because the ads embedded in e-mail don't bring in that kind of revenue."

People use their e-mail accounts frequently, so it makes sense that advertisers would want their placements there. E-mail sites are also good for viral campaigns. If a user likes an ad and wants to pass it along, he or she is already at the right site to do so.

But is e-mail really where users spend the most time? An Online Publishers Association study found that although Internet users in 2003 spent the most time on communications, including e-mail, they have since shifted priorities, putting content time on top.

Determining the right place for an ad depends on far more than a single statistic. It would be easy to say that marketers should consider content sites for a greater proportion of their placements.

But many content sites are ill suited for particular campaigns, either because the site's demographics are wrong, the content itself is objectionable, the site doesn't accept certain types of ads or other reasons.

E-mail sites, by contrast, tend to offer access to a variety of users without the context of objectionable ads.

Community sites are already drawing the second-greatest amount of ad revenue after e-mail sites, according to Nielsen//NetRatings. With more content showing up on community sites, that figure is likely to increase faster.

US Internet advertising spending will reach $61.98 billion in 2011, according to Veronis Suhler Stevenson's "VSS Forecast" report published in August 2007.

The media investment bank estimated that alternative advertising spending, including Internet, mobile, video game and digital out-of-home ads, grew 36.6%, to $26.53 billion, in 2006. 

Campaigns which use both display ads and search marketing convert more online shoppers into buyers than those which use only one of these tactics.

That is the main finding of a Yahoo!/comScore study called "From Clicks to Bricks: The Impact of Online Pre-Shopping on Consumer Shopping Behavior."

Among consumers in the study group who had been exposed to both search and display ads, 43% made in-store purchases, compared with 26% of those who had viewed only search ads, and 6% of those who had only seen display ads.

The search/display combination also increased in-store spending. Those consumers who had seen both ad types spent an average of 83% more than those who had not seen either type of ad.

In comparison, consumers who had seen only search ads spent 26% more, on average, than those who had not seen any ads. Exposure to display ads lifted in-store sales an average of 11% over spending by buyers who had not seen any ads.

A similar study of online buyers conducted about a year ago yielded even more dramatic results. Atlas' "The Combined Impact of Search and Display Advertising — Why Advertisers Should Measure Across Channels" found that exposure to both ad types increased conversion rates by 400% over display ads alone.

Many studies on the effectiveness of search and display compare the two, rather than looking at them in tandem. This search vs. display approach often measures click-through rates (CTRs) rather than conversions. CTR is a fundamental metric of pay-per-click (PPC) advertising.

By this measurement, the search click rate tends to surpass that for display ads. Morgan Stanley estimates a steady rise in the search marketing CTR from 10.4% in 2003 to 12.6% in 2010.

The worldwide online population will grow to 1.5 billion in 2011, from 1.1 billion in 2006, according to JupiterResearch's "Worldwide Online Population Forecast, 2006 to 2011: Emerging Economies Catalyze Future Growth" report. The growth will put 22% of the world's population online in 2011.

Brazil, Russia, India and China are expected to account for most of the growth. This is mainly because the online populations of the US, Canada, Japan and Western Europe are already mature.

North America's share of the worldwide online population is actually expected to shrink to 17% in 2001, down from 21% in 2006.

Vikram Sehgal, research director at JupiterResearch, said, "In [China and India], increased infrastructure development and relatively higher purchasing power from rapid growth of gross domestic product will coincide with increased consumer adoption of the Internet through 2011."

eMarketer's Internet population estimates put the industrialized countries of the Asia-Pacific region on top of the world in penetration rates. Over 70% of South Korea's population uses the Internet, and rates are not much lower in Japan and Australia. Both Canada and the US have Internet penetration rates of around 63%, while the UK, Germany, France, Italy and Spain have all yet to hit the 60% mark.

Morgan Stanley estimated in November 2006 that there will be over 1.34 billion Internet users worldwide in 2007. The International Telecommunication Union (ITU), a long-standing benchmark for such data, put the total for 2005 at 964 million, only slightly less than Morgan Stanley's 1.04 billion estimate for the same year.

Morgan Stanley undoubtedly has the global reach to put together reasonably accurate numbers, and the ITU gets its data directly from service providers and governments. Reflecting this broad consensus from key sources, eMarketer puts the total number of Internet users worldwide at 1.1 billion in 2006 and 1.3 billion in 2007.

"If only the definition of an 'Internet user' were uniform across the world," says Ben Macklin, Senior Analyst at eMarketer. "Unfortunately each country defines an Internet user differently."

"For example," Mr. Macklin says, "some research agencies define an Internet user as someone who uses the Internet once per month, others once per week. Some include just users over 14 years of age, some over 3 years of age. Gauging an accurate measure of an Internet audience is still an inexact science."